The Agenda

Will Wilkinson on Rick Santorum’s Economic Freedom Agenda

At Democracy in America, Will Wilkinson has a characteristically tart and well-observed critique of Rick Santorum’s new “economic freedom agenda.” I am somewhat more sympathetic to measures designed to ease the burden on parents than Will.

Mr Santorum promises to “triple the personal deduction for children and eliminate the marriage tax penalty”. What does any of this have to do with economic freedom? If paying people to have children makes them more free, why don’t the childless deserve equal freedom? Because freedom is the freedom to do God’s will and God wants us to have big families? The “pro-family” elements of Mr Santorum’s plan are transparent attempts at social engineering through fiscal policy.

Some non-trivial share of the expenses associated with child-rearing can be understood as investments in human capital akin to investments in business enterprises. Most advanced market democracies give preferential tax treatment to capital income on the understanding that doing so will encourage productivity-enhancing investment. This kind of tax policy is necessarily more fraught in the context of human capital, as there is a great deal of heterogeneity in how parents deploy resources and, thankfully, human capital is not terribly “liquid.” So I completely understand that why some might question the notion that a well-designed child tax credit might actually be a sensible growth-enhancing measure. 

But let’s acknowledge that something like an expanded child tax credit and income-splitting (which aren’t quite what Santorum has in mind, but bear with me) does represent social engineering of a kind. Social engineering through fiscal policy is unavoidable, as I suspect Will would agree. Short of a head tax, which has its own problematic implications, almost any imaginable income tax will shape the choices of individuals and communities along a number of dimensions: Do we concentrate on market or non-market production? Do we privilege those with a proclivity towards asset-building over those with a proclivity towards consumption? 

One of my beliefs is that the exercise of private economic liberties, including the building of cooperative ventures like for-profit corporations or non-profit foundations, etc.,  is an important form of self-expression — it allows us to develop our intellectual capacities, to pursue broad social goals, and to fulfill our sense of who are meant to be, etc. (I’ve been influenced by the normative political theorist John Tomasi, who has written eloquently on the relationship between respecting the freedom and equality of all citizens and recognizing the importance — not the non-negotiable status, but the importance — of private economic liberties.) We find it entirely unremarkable that we are obligated to share the details of our economic lives, e.g., our sources of income, the assets we’ve accumulated, etc., yet we’d presumably found it outrageous if we were expected to disclose the details of our intimate lives to a federal bureaucracy. One obvious decision is that economic choices have spillover effects, negative and positive. But of course the same can be said of the choices we make in our intimate lives. It happens that the exercise of state power in the economic domain is so pervasive that we take it for granted, while the exercise of state power in intimate life has experienced a dramatic rollback over the last century. (Social regulation used to take place primarily at the local level in the United States, which is one reason why the notion that 19th century America was a laissez-faire utopia is more than a little misguided.) 

To be sure, my beliefs regarding the importance of private economic liberties are fairly marginal, and I accept that something like an income tax is here to stay, as much as I’d prefer some kind of arm’s-length arrangement in which, say, we’d combine a VAT and a universal demogrant to meet all of economic policy needs (practical questions aside). And I also accept that, as a result, some degree of social engineering is here to stay. That leaves us in the realm of messy choice-making. On the whole, I’d rather we subsidize child-rearing than the purchase of large homes in capacity-constrained regions or high-tax jurisdictions at the expense of low-tax jurisdictions. Not subsidizing child-rearing, meanwhile, might deepen the advantages of those, like myself, who delay having children, and thus contribute somewhat less to the building the human capital endowment of the generation that will pay for old-age transfers, etc., than those who do not. This language is somewhat discomfiting. But that’s where a multigenerational transfer state designed to replace some of the functions of multigenerational kinship networks leaves us: my choices matter for your life and vice versa, like it or not. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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